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This is a ten question multiple-choice quiz covering the material in this Unit. I hope you do well!

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Question 1 of 10

1. Question

10 points

A system of income inequality:

All of the listed answers are correct.

provides those who are more productive the ability to reap higher rewards.

generally leads to a higher average standard of living than a system of income equality.

provides incentives for individuals and businesses to be productive and efficient.

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Question 2 of 10

2. Question

10 points

Which of the following is true about income inequality?

An economic system with significant income inequality can lead to political inequalities.

The greater the income inequality, the less efficiently an economy operates.

Income inequality is necessary to establish social stability.

In order for a country to be productive, a system of income inequality requires significant government redistribution of wealth and thus relatively high taxes.

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Question 3 of 10

3. Question

10 points

According to our text, which of the following is a common misconception (something not true) about income inequality?

Greater income inequality means a higher absolute standard of living for the wealthy and a lower one for the poor.

Greater income inequality means that the relative difference in incomes between the rich and the poor is widening.

Countries with greater income inequalities have higher standards of living.

None of the listed answers is a misconception about income inequality.

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Question 4 of 10

4. Question

10 points

In the United States, the gap between the higher-income groups and the lower-income groups, as a percentage of what they earn relative to the country’s total earnings, has widened the past several decades. Therefore, we can conclude that:

in relative (comparative) terms, the rich have gotten richer and the poor have gotten poorer.

in absolute dollar amounts and purchasing power, the rich have gotten richer and the poor have gotten poorer.

The relative gap between the richest 20% of our income earners and the poorest 20% of our income earners has narrowed.

the richest 20% of our income earners has gotten poorer and the poorest 20% of our income earners has gotten richer.

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Question 5 of 10

5. Question

10 points

We can probably never eliminate poverty completely. However, the following are common ways to help avoid poverty, except one. According to our text, which of these is not a common factor in reducing a person’s chances to become poor?

Become a home owner.

Live a healthy lifestyle.

Learn a trade.

Invest wisely and borrow wisely.

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Question 6 of 10

6. Question

10 points

Country A has a Gini coefficient of .8 (point 8), and country B has a Gini coefficient of .2 (point 2). Which of the following can we conclude?

None of the listed choices is correct.

Country B has more income inequality than country A.

If you add the incomes of the populations of country A and country B, you will end up with a perfectly equal income distribution.

Both countries have equal income distributions, because their Gini coefficients are less than 1.

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Question 7 of 10

7. Question

10 points

Which of the following is true about poverty in the United States?

The government determines the poverty threshold amount for households. If the government increases the threshold considerably, then the poverty rate most likely increases, even though the overall household incomes of the poor haven’t changed.

The government has not increased the poverty threshold (the cutoff line below which households are considered poor) for at least ten years. This means that over time more households have become poor, according to the definition.

Only households who have more than one breadwinner can be considered poor. The breadwinner must either have a job or (s)he must be looking for a job.

The poverty rate in the United States has been steadily declining during the past four decades. This is because of the success of government welfare programs.

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Question 8 of 10

8. Question

10 points

The Lorenz Curve is a curve that illustrates a country’s income inequality. The straighter the curve:

the more income equality exists.

the closer the country is to perfect income inequality.

the more poverty exists.

the closer the country is to a perfect economy.

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Question 9 of 10

9. Question

10 points

Which of the following is incorrect (not true) about marginal and average tax rates?

In a proportional income tax system, the marginal tax rate is higher than the average tax rate.

In a progressive income tax system, the marginal tax rate is higher than the average tax rate.

In a regressive income tax system, the marginal tax rate is lower than the average tax rate.

None of the listed answers is incorrect.

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Question 10 of 10

10. Question

10 points

Which of the following represents an example of a regressive income tax?

Someone with an income of $20,000 pays $2,000 in taxes to the government, and a person with income of $80,000 pays $7,000 in taxes.

Someone with an income of $20,000 pays $2,000 in taxes to the government, and a person with income of $30,000 pays $4,000 in taxes.

Someone with an income of $20,000 pays $2,000 in taxes to the government, and a person with income of $40,000 pays $5,000 in taxes.

Someone with an income of $20,000 pays $2,000 in taxes to the government, and a person with income of $40,000 pays $4,000 in taxes.